"What if this is as good as it gets" is far off the mark. Besides other errors, the most dangerous (in that people might believe it) is the extension of the association between risk and interest rates (a relative yield spread effect) in a causal manner to prevailing interest rates across the wider economy. No - "background systemic risk" has almost nothing to do with interest rates (not directly, anyway). Risk has direct bearing on relative yields but not on average yields. That should be cleared up. Underlying demand and supply of savings vehicles is what drives real interest rates in the long run:

"It is a victory for common sense and good policy that the International Monetary Fund has publicly decided to reverse its past mistakes and come out clearly for sensible fiscal approaches – not least recognising the impact on growth of cutting the deficit and that reducing public debt is a task that should primarily occur once countries are out of recession."
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Angela, are you listening? The persistence in stupidity of allegedly rational, and, certainly, intelligent people is the greatest puzzle in history.
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I have long been writing in this vein:
"There is nothing quite so stupid as watching the failure of stupidity, and then adopting that same stupidity as your own.
Austerity in a depression is as stupid as it gets."
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I most certainly agree that the dismal science is in need of many doses of reality, but a strong purgative to flush the recent universal and delusional credo condemning all debt was desperately needed right now.
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To quote me:
"The whole idea of a specific universal threshold is the error. Much depends on how the borrowed money is spent. Of course, in any simple correlation, it is quite arbitrary to decide which factor is cause, and which effect. If the cause of a high debt is low growth, additional borrowing, properly deployed, may increase growth enough to lower the overall debt in the end. These matters are specific to specific situations; the policy maker's life would be made much easier if there were reliable universal indicators."
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"Correlation alone taken for causation is the deadly sin of statistical analysis. In this instance, only ideological preference could have directed the mind to distinguish cause from effect - assuming that there is, in fact, any causal relationship at all."

"Policy makers drive down systemic background risk. This makes everyone safer. In response, each individual takes on a little more personal risk and contributes slightly to the general background risk.
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Eventually we will reach a point where policy makers have driven out so much systemic background risk that any marginal decrease systemic background risk will simply induce individuals to take on more personal risk until they raise the total risk level back up to where it was before.
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Safer policy then has little net effect."
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Show me the empirical work to back up this ridiculously exaggerated twaddle. It's just plain dumb, even by economists' standards.

Dube hits it:
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"So what does this all show? It shows that purely in terms of correlations, a 10 point increase in the debt-to-GDP ratio in the RR data is associated with a 6/10 of a percentage point lower growth in the 3 years prior to the increase, but actually a slightly larger than usual growth in the few years after the increase. During the year of the increase in debt-to-GDP ratio, GDP growth is really low, consistent with the algebraic effect of lower growth leading to a higher debt-to-GDP ratio.
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All in all, these simple exercises suggest that the raw correlation between debt-to-GDP ratio and GDP growth probably reflects a fair amount of reverse casualty. We can’t simply use correlations like those used by RR (or ones presented here) to identify causal estimates."
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It's not nearly as simple and straightforward as the austerity-wackos would have us believe. If a government uses borrowed money well, it increases the future output of public goods, just as when a business uses borrowed money well, it increases the future output of private goods. That is why public accounts that do not distinguish capital investments from operating expenses are as foolish as for a company that did the same. Of course, this implies that public debts ought to be decreased by public assets, just as in private sector accounting.